Against Intellectual Monopoly

Michele Boldrin and David K. Levine's Against Intellectual Monopoly argues that patents and copyright give their holders a government-enforced power to tell other people how they may use copies they own, and that innovation can be financed without that power. The book is worth reading because it keeps two questions apart: how creators get paid, and whether the law must let them forbid copying. Page references follow the authors' final online version, dated January 2, 2008. Their landing page lists the Cambridge print edition separately.

The foundation is chapter 6. The authors accept ordinary property in copies, so the copy you buy is as much yours as your socks. They deny that owning it brings control over other people's copies (PDF 141–142). A shoe factory shows the economics. Capacity is finite, so price can stay above marginal cost, and that gap, which they call competitive rent, pays for the plant. Copies of ideas cannot flood the world instantly either. The first seller earns rents while imitators build capacity, and a margin remains as long as learning to copy has a fixed cost (PDF 149–151). Lead time and complementary sales, from live performance to an inventor's consulting, add income (PDF 156–162). The authors grant that a large fixed cost combined with large minimum capacity can leave rents insufficient. They treat the frequency of that case as an empirical question (PDF 154).

Exclusion also has a cost for the next inventor. Watt's separate-condenser patent let Boulton and Watt block Hornblower's compound engine, though Hornblower's design became the basis for later steam development (PDF 3–6). Chapter 3 traces the same mechanism through patent pools. Bessemer steel producers pooled their essential patents after rival firms' control of those patents produced what a quoted source calls an almost indissoluble technological deadlock (PDF 71). The authors read pools as double evidence. Insiders recover invention costs without enforcing patents against one another, and the same patents keep newcomers out (PDF 72). These histories show a mechanism. They give no controlled estimate of abolition's total effects.

Chapter 2 applies the mechanism to software. Copyleft licenses such as the GNU General Public License require anyone distributing modified code to release it under the same terms. Firms accept this, the authors explain, because buyers fear lock-in to proprietary software whose sole legal supplier might disappear, and an open license assures them of future competition (PDF 22). Red Hat is the commercial test. It obtained Linux free, paid for customization and testing, and had to publish its code. Other firms then sold copies of its system at a fraction of its price. Red Hat still sold many more packages, and it still led the market when the authors checked in December 2006. Their explanation turns on support. A buyer with a software problem would sooner call the people who wrote the program than the people who copied it (PDF 25–26). Copying left customization, testing, support and reputation scarce, and Red Hat sold those. The case shows one route to payment. It does not show that all open-source creation pays.

Pharmaceuticals are the hard case. The authors attribute rising drug development costs mostly to the longer and costlier clinical trials the FDA required, and trial results had to be made freely available to competitors. Abolishing patents under that rule "cannot be a good reform" (PDF 245; PDF 280). Their proposal has the NIH fund stage II and III trials through competitive applications from firms and bids from clinics. The results would be published, and firms would stay free to test privately. Drug patents would then fall to four years from authorization of sale, after a ten-year transition (PDF 294). They call this no panacea and say they believe it would yield no fewer valuable drugs (PDF 295). That belief is a forecast the book does not test.

In the conclusion, the authors argue for sequenced steps toward long-run abolition. The first step is halting further expansion, such as patents on publicly funded research (PDF 282). They give two reasons for going step by step. Drug regulation grew up around patents. And a few organized monopolists stand to lose much while many consumers each gain little (PDF 280–281). If competition later proved insufficient, they would add subsidies and would not restore monopoly (PDF 297).

The book suits readers asking whether financing creation requires the power to exclude copying. Chapter 6 explains its economics in plain English with a supply-and-demand diagram (PDF 142; PDF 150). Readers who want causal estimates of reform will need evidence beyond its histories and surveys.